Tuesday, April 07, 2009

The whole story

The Associated Press and the newspaper industry plan an aggressive effort to track down copyright violators on the Internet and try to divert traffic from Web sites that don't properly license news content, the AP board announced Monday.

The not-for-profit news cooperative also said it will cut fees by $35 million for U.S. newspapers in 2010 — on top of a $30 million reduction that took effect this year — and loosen its long-standing requirement for two years' notice to cancel AP service.

The financial moves are part of an overhaul of the AP's policies in the face of extraordinary financial hardship for newspapers. The changes were announced at the AP's annual meeting in San Diego, along with the copyright initiative launched by the AP's board, which is made up largely of newspaper executives (sorry, wrong pic).

"We can no longer stand by and watch others walk off with our work under some very misguided, unfounded legal theories," said Dean Singleton, the AP's chairman and the chief executive of newspaper publisher MediaNews Group Inc.

"We are mad as hell, and we are not going to take it any more," he added, prompting applause in the meeting.

Specifics behind the initiative are still being worked out. One idea under development would be to create a system that can help track whether news content is being legally distributed online. The AP also said it will work with newspapers and broadcasters to direct readers to "landing pages" that could offer news from the AP and its members, rather than unauthorized sites.

Sue Cross, an AP senior vice president, emphasized that the initiative could take many forms. "It's a significant move for the industry to work together," she said.

Copyright is an especially thorny issue for the AP and newspapers, which have seen their material spread on the Internet far beyond their direct control in a cut-and-paste age.

The AP has tangled with bloggers over the extent to which "fair use" principles should allow them to post AP text on their sites. The cooperative also has sued online news aggregators over copyright and is embroiled in a closely watched lawsuit with artist Shepard Fairey, who made iconic Barack Obama campaign posters out of an image that originated with an AP photo.

Wendy Seltzer, a fellow at Harvard's Berkman Center for Internet and Society, and Fred von Lohmann, a senior staff attorney who specializes in intellectual-property issues at the Electronic Frontier Foundation, both said they needed more details to determine what effects the AP initiative would have.

The fee reductions are meant to help newspapers deal with another huge challenge — their finances.

The cuts in the cost of AP service are expected to average just under 20 percent but will vary widely, depending on what content newspapers buy, the AP said. It unveiled a two-tier price structure — a "Member Choice Complete" package with full access to AP reporting and a "Member Choice Limited" option with minimal national and world news.

The fee cuts this year and next will mean that the AP's revenue from member newspapers in 2010 is expected to be about $135 million — one-third less than what it was in 2008, the AP said. Next year, newspapers are expected to account for 20 percent of the AP's total revenue, Singleton said, down from about 25 percent now.

The AP's revenue grew 5.3 percent last year to $747.7 million, marking its largest percentage increase since 2004, thanks partly to growth in new media, video and photo archive markets. Excluding the Beijing Summer Olympics and the U.S. presidential election, which enabled the AP to sell more content, the cooperative said revenue grew 3.2 percent.

The Olympics and the presidential election also made the AP incur higher expenses, one reason that pretax profit fell 18 percent to $37.3 million. Net income, however, rose 4.5 percent to $25.1 million because of lower tax expenses. The AP remained debt-free, though its cash balance dropped 26 percent to $34.5 million at the end of last year.

Despite healthy indicators, the AP said it is facing unusually tough times. Tom Brettingen, the AP's senior vice president and chief revenue officer, said revenue in 2009 is expected to fall to around $700 million.

"The new member pricing program, coupled with attrition in renewals, will result in a revenue decline not seen by the company since the Great Depression," the AP's annual report reads. "To counter this, we must reduce our expense base."

No decisions have been reached on how to cut costs, Brettingen said, but he reaffirmed the company's plans, announced in November, to trim its payroll costs by 10 percent this year. The AP, which has a global staff of 4,100 people, still hopes to achieve most of the cuts through attrition.

About 180 newspapers — 14 percent of the AP's U.S. newspaper membership — have threatened to leave the AP, including The Columbus (Ohio) Dispatch, the Star Tribune of Minneapolis and newspapers owned by Tribune Co. Reasons vary, but many complaints center on cost.

Brettingen said the rate of cancellations waned in anticipation of Monday's announcement. Members have generally welcomed broad outlines of the plan as it was explained to them over the last three months, he said.

Starting Jan. 1, members can cancel their service with one year's notice. But those who agree to give two years' notice will pay 3 percent less for their AP services, Singleton said.

In 2007, the AP's board approved an overhaul of the news cooperative's fee structure. It called for a two-tier system that would have given newspapers a basic package for breaking news and the option of buying a premium service called AP Complete, with analyses, enterprise and other additional stories.

The AP suspended the plan last October after some members complained it didn't go far enough at cutting their costs.

Under the revised structure announced Monday, newspapers with Member Choice Complete — the full run of AP reporting — can cut costs by declining any of four enhanced packages, which are sports, financial, analyses and lifestyles, Brettingen said. Likewise, newspapers with Member Choice Limited can add any of those four packages for an extra fee.

"AP is fully committed to helping the industry meet the challenges we face together," said CEO Tom Curley.

The editor of one member newspaper that has told the AP it intends to cancel its service, Bruce Winges of the Akron (Ohio) Beacon Journal, said the rate reduction "seems like a good step." But Winges added that he needed to know more about what the various news packages will cost.

Winges also said the new option for a one-year cancellation notice "doesn't seem like that great of a change. All of the other contracts we have with our information providers aren't built like that."

Other publishers welcomed the price breaks and said the savings would enhance their coverage of local news.

"This is fantastic," said Michael E. Reed, CEO of GateHouse Media Inc., a newspaper publisher based in Fairport, N.Y. "We couldn't ask for better. I haven't crunched the numbers, but it would be a substantial savings for us."

The AP board also discussed rate cuts and term adjustments for some local broadcasters Saturday and will address those issues at its July meeting.

The AP is a global news company founded in 1846. It serves about 1,500 newspapers and 5,000 radio and television station members in the United States. About 1,300 of them are regular members and more than 4,000 are associate members — generally weekly newspapers and broadcasters.

The AP named four new board members Monday: Elizabeth Brenner of the Milwaukee Journal Sentinel and Milwaukee-based Journal Communications Inc.; David M. Paxton of Paxton Media Group; Steven R. Swartz of Hearst Corp.'s newspapers division; and Paul C. Tash of Times Publishing Co. and the St. Petersburg (Fla.) Times.

Three directors retired from the board after nine-year terms. They are Walter E. Hussman Jr. of the Arkansas Democrat-Gazette, Julie Inskeep of The Journal Gazette in Fort Wayne, Ind., and Bruce T. Reese of Bonneville International Corp. in Salt Lake City.